Consideration is something of value exchanged for the promise. It is something given by a promises in return for something given by the promissory. According section 2(d), Contract Act provides “when at the desire of the promissory, the promise or any other person has done or abstained from doing or to abstain from doing something such act or abstinence or promise is called a consideration of promises” Consideration Is another Important element of a contract and any agreement made without consideration Is a void agreement.
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Section 26, contract act 1950 provides that ” an agreement made without consideration is avoid”. The Malaysian case which applied the principle of past consideration is the case of: Keeping Prospecting Ltd. & S. K. Statesman & Ours v. A. E. Schmidt & Marjorie Schmidt  1 ML 170 Schmidt, a consulting engineer, had assisted another in obtaining a prospecting permit for mining iron ore in the State of Chore. He also helped in the formation of the company (Keeping Prospecting Ltd. ) and was appointed as the Managing Director.
Subsequently, Schmidt entered into an agreement with the company. In the agreement, the company agreed to pay him one per cent of the value of all ore sold from the mining land. This was “In Page 1 of 10 consideration of the services rendered by Schmidt on behalf of the company before TTS formation, after incorporation and for future services… ” Later, an issue arose in this case, whether the services rendered by Schmidt after the incorporation of the company but before the agreement was made, were sufficient to constitute a valid consideration, even though they were past.
The Privy Council ruled that: it was valid consideration and Schmidt was entitled to claim the amount. However, there are exceptions to this general rule. With these exceptions, even though the agreement Is made without consideration, the agreement still valid and will be enforceable. The exceptions Include the followings: + agreement made on account of natural love and affection. Agreement to compensate a past voluntary act. * agreement to pay a This exception is provides in Section 26(a) , contract Act 1950.
The rule provides that any agreement which is made without consideration is still valid if ” it is expressed in writing and registered under the law ( if any) for the time being in force or the registration of such documents and is made on account of natural love and affection between parties standing in a near relation to each other. ” This means the agreement that is not supported by any consideration is valid if it fulfils the following conditions: *The agreement is made in writing. The agreement is registered under the existing law which requires its registration ;and *The agreement is made on account of natural love and affection between the parties standing in near relation to each other. Page 2 of 10 Ex: Mr.. A has an estate about 300 sum. He wants to give 2 his daughter. He talk to their in the family meeting with their husbands in law. This is not a contract until Mr.. A puts his promise to his daughters in writing and registers it under a law for the mime being in force for the registration of such documents.
Until this time, it is become a contract. 2. Agreement to compensate a past voluntary act. This is the exception provided in Section 26(b), contract Act 1950. The rule provides that an agreement without consideration is valid if” it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promissory, or something which the promissory was legally compellable to do”. Ex: Ms. Ann is the neighbor of Mr.. Clive and Ms. Ann support Mr.. Clive to take care his son during he has having a meeting. Mr.. Clive promise to pay Ms.
Ann for this work. This is a contract and Ms. Ann can enforce Mr.. Clime’s promise. 3. Agreement to pay a statue- barred debt. This is another exception provide in section 26(c), Contract Act 1950. The rule provides that an agreement without consideration is valid if” it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.